Glossary · DeFi
Health factor
Also: health score
Health factor is a lending protocol's single summary of how close a position is to liquidation, computed as risk-adjusted collateral value divided by debt value, with liquidation triggered when it falls below one.
Related terms
- Liquidation
- Liquidation is the process in which a third party repays part of an undercollateralized borrower's debt and receives their collateral at a discount, closing the shortfall before the protocol takes a loss.
- Loan-to-value
- Loan-to-value, abbreviated LTV, is the ratio of borrowed value to collateral value, with each asset assigned a maximum LTV for new borrowing and a higher liquidation threshold at which the position becomes seizable.
- Collateral
- Collateral is the asset a borrower locks in a lending protocol to secure a loan, seizable by liquidators at a discount if the loan's value rises too far against it.
Guides that explain Health factor
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